Adding to the Indirect Cost Chatter

Mike the Mad has a post up this morning in response to a post by Proflikesubstance regarding overhead... aka ‘indirect costs’. In this time of shrinking budgets I think that this is an important conversation to be having… but something caught my eye in PLS posts that I think is worth mentioning.

First, what are ‘direct’ and ‘indirect’ costs and what are they to be used for? From the NIH Grants policy statement (Part II: Terms and Conditions of NIH Grant Awards) we find this:

On direct costs:  A direct cost is any cost that can be specifically identified with a particular project, program, or activity or that can be directly assigned to such activities relatively easily and with a high degree of accuracy. Direct costs include, but are not limited to, salaries, travel, equipment, and supplies directly benefiting the grant-supported project or activity.

On indirect costs:  See facilities and administrative costs definition.

On facilities and administrative costs: Costs that are incurred by a grantee for common or joint objectives and that, therefore, cannot be identified specifically with a particular project or program. These costs also are known as indirect costs.

So, Proflikesubstance starts out like this….

Among many things, overhead has two major functions: 1) pay for the research enterprise, 2) fund start-up packages. Point 2 is pretty straight forward – a research career isn’t going to get off the ground without funds to create data prior to the first grants rolling in. The first point, however, is where many people seem to have a blind spot. (bold is mine)

Say WHAT? I hate to be disagreeable, but I feel like PLS has it kinda upside down. Based on NIH’s own definitions, its just obvious to me that $$ earmarked for facilities and administrative costs,  running the building (paying for the building, paying janitors, keeping the lights on etc) and the administrative infrastructure necessary to carry out research (compliance, HR, grants administration and whatever else you can think of), should be used for that purpose. And although I’ll grouse privately and maybe not-so-privately about the huge hulking disparity in the IDC return for different institutions (some institutions get near 100%, while others get only 50%)- I recognize that some institutions have a budget from the taxpayers of their fair state to defray some of the cost of keeping the lights on, while private institutes generally do not (we can start a whole different argument here).

But holy cow- I don’t get that #2 is “pretty straight forward”. I’m not sure that that is even allowable by NIH rules to use NIH IDCs for start-up packages for new faculty.  I agree that it is probably happening in many institutions- via some indirect route that is not totally transparent. YIkes!

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5 thoughts on “Adding to the Indirect Cost Chatter

  1. Thanks for clarifying this. I was surprised about the use of IDC for start up costs, but I don’t know enough about department administration to know if that’s normal or not.

  2. I doubt that indirects are funneled straight into start-ups…But what the university recoups in indirects for admin, building maintenance, etc does invariably free up more of its own green for allocation elsewhere… to startups among other things. I’m not sure that this is really objectionable, though, so much as an inevitable consequence of the system.

  3. Sort of what dsks said. Once the University accepts the F&A, what they do with it is unrestricted. The common practice is to allocate a small percentage of the F&A to schools, departments and PIs. This money forms the pot that is used to cover start up costs.

    So, what determines the F&A percentage? It is a negotiation between the University and the Federal Government (either NIH or DOD depending on which provides the largest amount of funding to the particular university). The University shows how much it is spending in allowable categories and a rate is agreed on. This includes what you mentioned, the library, computer related costs, etc.

  4. 1) of curse it is legal, as long as the university provides the services covered by the F&A cost agreement which the Feds bought

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